VAP in business 25 years

At the annual meeting of Value-Added Products (VAP), CEO Steve Sterling told a small group of investors that Fiscal Year (FY) 2024 was profitable ($167K) for the investor-owned cooperative. Revenue increased 4.4%. He happily reported that VAP ended the FY current on A/P (accounts payable), with property taxes paid to date, and current on loan payments and interest due.

The Alva cooperative incorporated Aug. 6, 1999, so turns 25 in 2024. VAP was formed to add value to the hard, red, winter wheat grown by farmers in this area. The cooperative manufactures frozen dough products, primarily pizza crust, many describe as the perfect combination of fluffy and light bread with just the right crunch.

VAP currently employs 37 full-time, six part-time and two contract employees at their plant located on the south end of Alva along US-281. Sterling said VAP's BRC audit is completed and a certified AA rating. It was an announced audit. "I'm very proud of my team for that. It's the highest rating you can get on an announced audit."

Giving a VAP business review, Sterling said, "It takes about $300,000 average monthly costs just to show up!" That does not include cost of ingredients, packaging, scrap, repairs, etc. Those monthly costs are (some of which will increase next year) current loan payments, employee health insurance, insurance, utilities, salaries, and property tax.

Because VAP has used their dough-making equipment for 25 years, it was well beyond its life expectancy and needed an upgrade. To finance this upgrade, Sterling said that VAP obtained a $2 M bank loan. VAP was also rewarded with a USDA REAP grant that will match 25 percent up to $500K for modernization expense to reduce energy use.

As reported in July, the upgrade began then. "It's a fact we're slow right now following the updates," Sterling said. "We lost momentum with the project and people ordering ahead of time to fill their pipeline when we were going to be closed for two weeks." Contractors completed the installation in two weeks.

"This was the first big step of our planned updates with adjustments and calibration continuing. Still more modernization in VAP's future," Sterling said.

The plant is currently running one-shift only in a four-day work week: three production days; and one sanitation day.

As of Nov. 4, Sterling said VAP had A/P of $107,292.59; and A/R of $312,283.73. "YTD revenue is down about half a million," he confirmed. As it has since VAP's inception, their FY runs from June 1 to May 31. Sales YTD through September '24 were $1,457,006. The next annual meeting will be in Fall 2025.

"We've made enormous progress on reconditioning the facility. We're going to get more volume soon. We've got some great prospects for new business, and our R&D team has been busy making samples for these potential customers," Sterling said of their product sales.

When asked if there is an outlet locally where individual shoppers can purchase VAP crusts, Sterling replied unfortunately not at this time.

So far completed in the update (or in progress) are: Spiral updates – all four; conveyor belts, electronics, freezer ceiling, decking, ammonia coils (proofer/dock), dock seal, and silo diverter valve replaced.

More projects still planned for 2024 include: Form and Frys – new drives and programming, update mixer cage hardware, replace ammonia pipes/insulation, recondition paper cutter, continue updating main line hardware, replace several main line belts, update forklift/power jacks, install capacitor bank, install new VFD, control panel, and motor for booster compressor.

When asked about VAP stock values, Sterling said, "We are replacing 20-year life equipment with more to do. We still make a unique premium product vs. competition. With time, stock should slowly regain value with infrastructure updates and debt paydown. Our greatest asset is our people. VAP does employ over 40 people in our small community, including great benefits, a four-day work week, and a great vacation and time off package."